The "Made in Italy" label conjures images of little old men and women in aprons and spectacles, stooped over wooden tables, cutting leather and sewing by hand in workshops that dot the hills of Tuscany. It certainly doesn't make you picture Chinese immigrants toiling long hours in ramshackle, poorly illuminated sheds, and then sleeping in small rooms behind thin plywood right there in the factories.

These days, the coveted "Made in Italy" label on those Prada bags and Gucci shoes, which can quadruple a price, may not mean what it used to. Thousands of Tuscan factories that produce the region's fabled leather goods are now operated and staffed by Chinese. Though located in one of Italy's most picturesque and tourist-frequented regions, many of the factories are nothing more than sweatshops with deplorable conditions and virtually indentured workers.

Chinese laborers have become such an integral cog in the high-fashion wheel that large Chinatowns have sprung up here and in Florence. Signs in Chinese, Italian and sometimes English advertise pronto moda (ready-to-wear). At the main public hospital in Prato, the maternity ward on a recent morning was a cacophony of 40 squalling babies, 15 of them Chinese. "Mi chiamo Zhong Ti," one of the crib tags said -- "My name is Zhong Ti."

In Prato, Tuscany's historic and industrious textile center 10 miles northwest of Florence, Chinese who are legal residents make up about 12% of the population (and probably close to 25% when illegal Chinese are counted, police say).

For the big-name clothing labels, Chinese-staffed workshops provide an important way of keeping costs down by supplying cheaply and quickly made purses, shoes and other products. It helps the fashion houses compete and, many argue, it's better than the alternative: moving all production offshore.

But for legions of Italian craftsmen and -women who try to maintain painstaking but costly old-style practices, the cheaper Chinese labor is deadly.

"It's a crazy competition. In fact, you can't compete," said Andrea Calistri, whose third-generation family business has been making handbags for top designers from voluptuous leather and buttery suede for more than half a century.

In a way, this is representative of the dilemma facing Italy as a whole: How do you compete in a hard-edged global economy while maintaining the standards that give a native craft its panache?

Three categories of problematic production plague the Italian fashion industry.

First there are the out-and-out counterfeits, part of a multibillion-dollar fraud denounced the world over. Consumers have long been aware of the fakes and knockoffs, made God-knows-where, that are hawked on street corners or out of the trunks of cars. Italian financial police last year conducted 250 raids on workshops in Tuscany alone and confiscated tons (literally) of cheap bags and shoes bearing fraudulent Prada, Fendi and Nike insignia.

Then there is the gray area of shoes and bags assembled at least partially in China, India, Malaysia and other low-cost locales, then brought to Italy for a final buckle, heel or strap. These items can, somewhat questionably, bear "Made in Italy" labels.

Finally, there are the products made completely in Italy but by Chinese immigrants. That's often technically legal. But it crosses the line when the workers are in Italy without proper documents and labor conditions for them are especially nasty.

Italian law governs safety in the workplace, the number of hours that can be worked and the minimum wage, among other rules, but the law is often flouted.

And so, it is possible that a fancy store may have expensive designer bags made by Chinese workers in Italy displayed next to the same bags made, also in Italy, by Italian workers, Calistri says. One cost 20 euros (about $30) to produce, the other 250 euros (about $365). The price tag is the same, often many hundreds of dollars.

That's plain wrong, Calistri says. "When you have a product like Prada or Dolce & Gabbana, you are not supposed to use illegal workers," he said. "If a customer pays 1,000 euros [about $1,470] for a bag, he has a right to expect not only the best materials and the best creation but also a respected legal process. "'Made in Italy,'" he said, "means tradition, know-how and standards. . . . It means not only made in Italy, but made in the Italian way." Calistri has formed a consortium composed of 65 companies, all small like his. They call themselves 100 Percent Italian.

In his workshop during a recent visit, women (and they are mostly women) in crisp white lab coats were attaching gilded bows to pink satin clutches for Roberto Cavalli, while a computer-guided laser sliced thin sheets of soft leather for designs by Bulgari or Donna Karan. Under bright fluorescent lighting, other women hand-stitched the suede inner pockets of another batch of designer bags. The next step to distinguish their work, Calistri says, is to implant microchips in handbags; with the chip, a consumer can check authenticity on his or her cellphone.

The top fashion labels remain largely aloof from this seedy side of the business. They say abuse is a marginal practice. However, in making use of a chain of suppliers and subcontractors, they can turn a blind eye, and do so, in the opinion of Calistri and other craftsmen like him.

An enormous portion of subcontractors today are Chinese, according to the Italian financial police, who monitor their activities. From fewer than 100 in Tuscany in the 1990s, the number of Chinese factories, workshops and related businesses in Prato and Florence had soared to 5,300 last year, said Police Capt. Edoardo Marzocchi.

Police have shut down many after raids exposed poor living conditions, lack of residence permits for foreign nationals and the failure to pay taxes. In one raid last year, police discovered a clandestine factory when neighbors reported unexplained comings and goings of Chinese.

In the factory, police found living quarters complete with small cells for sleeping and a shrine for prayer. No one spoke much Italian, except for one Chinese woman who seemed to be in charge. In broken Italian, she said she couldn't produce papers for any of the workers because they were "on tryout" and in the country temporarily. Police say that explanation is usually a ruse.

The Chinese workers "self-exploit," said Ye Huiming, a 28-year-old immigrant who serves as informal liaison between the Chinese community and city officials in Prato. "They spend a lot of money to come here and then they have to pay off their debts," Ye said. "They'll work 14 hours a day, they'll work at night, whatever it takes to accomplish that. "They don't come here to see the Michelangelos."

The movement of Chinese into the Italian garment industry has transformed this part of a country that only relatively recently has had to face the changes brought by large-scale immigration. Tuscany now has the largest percentage of Chinese residents anywhere in Italy. Chinese who have immigrated legally are settled and have moved up in the world, Ye said. There is the beginning of a second generation, Chinese who speak Italian well (even with a Tuscan accent) and follow the rules. One-third of all Chinese here are under 21.

Ye came to Italy 18 years ago as a 10-year-old with his mother, who worked long hours sewing in a factory, where the family also lived. Today, Ye is a businessman with his own apartment, a Chinese wife whom he met in Prato and a new baby. Still, he said, the climate is souring because of prejudice and misconceptions, especially when Chinese are blamed for undermining the Italian economy by dumping cheap products into the market.

The Chinese in Tuscany are becoming a more permanent fixture, but the vast majority are still tied to the fashion industry. Their role, and any abuse of workers or labor codes, in a sector that is so important to Italy, is generally a taboo topic. Calistri's group is unusual in wanting to talk about it. Another rare exception came in a television documentary this year called "Luxury Slaves," broadcast by "Report," a "60 Minutes"-style program on RAI-3, an Italian state channel.

It exposed the exploitation of Chinese through the use of subcontractors and the questionable practices behind the "Made in Italy" label. It sent earthquake-size shock waves through the top fashion houses, most of which refused comment. A few said they thought the claims were exaggerated and, besides, they could not be expected to be on top of all their suppliers.

The documentary reported that Prada had ended its dealings with one sweatshop when the company was made aware of its work. Asked by The Times for comment, a Prada spokesman issued a statement that said the company "controls directly each phase of the production process" at 14 factories it owns in Italy. Every supplier, the statement added, must comply with Prada's "very strict quality standards" and sign a pledge of ethical conduct.

The spokesman declined to answer questions, saying the people at Prada were too busy. It's the season, after all. New York Fashion Week was in full swing, the fall collections filling the runways.